Franchising is a popular method for expanding business. Through a licensing relationship a franchisor, or business owner, essentially sells a franchisee the rights to open a new business location. For instance, the Wendy’s franchise has many franchise locations, all of which were sold to various franchisees across the country. Once the Wendy’s franchise finds a new franchisee, the franchisee is granted the right to build their own location using preexisting systems, regulations, etc.
Franchising is an attractive business model for anyone new (or not) to the industry. Unlike an independent business, which requires growing from the ground up, a franchise comes with a pre-established, and usually successful, operational system. Through extensive training programs, franchisees learn all the ropes behind the business, eliminating the daunting trial and error process. Not to mention, a franchise comes with brand recognition is built right in.
FRANCHISING IS AN ATTRACTIVE BUSINESS MODEL FOR ANYONE NEW TO THE INDUSTRY.
Anyone looking to purchase a franchise will be given a Franchise Disclosure Document (FDD). It’s imperative that any franchisee fully understand the components and contents in any business’ FDD. Consisting of 23 different parts, the FDD, a legally mandated document, outlines different key pieces of information involved in franchise purchase. For instance, a Franchise Disclosure Document tells the interested franchisee more about the total fees and costs associated with purchasing the franchise of their choice.
The overall intention of the document is transparency. Both the company and franchisee need to be on the same wavelength in order for the purchase and future management of the business to run smoothly. Click here to see a more in-depth description and analysis of the Franchise Disclosure Document.
Todd A. Penegor, Chief Executive Officer, President and Director.
Gunther Plosch, Chief Financial Officer.
Kurt Kane, Chief Concept Officer.
Robert D. Wright, Chief Operations Officer and Executive Vice President.
Abigail Pringle, Chief Development Officer.
E.J. Wunsch, Chief Legal Officer and Secretary and Chief Compliance Officer.
All new Wendy’s franchisees must sign a Preliminary Letter Agreement and pay a $5,000 Application Fee. Quality conducts a background investigation for all prospective franchisees, guarantors, or any party that will own 5 percent or more in a Wendy’s franchise. A $325 reimbursement is required for each background investigation.
All Wendy’s franchisees (both new and existing) must pay a Technical Assistance Fee of $50,000 for each Wendy’s Restaurant included in the Franchise Agreement. The franchisor is under no obligation to refund this fee under any circumstance.
For those that have never built a Wendy’s Restaurant, they are considered a “First Time Builder,” in which case the Technical Assistance Fee may be cut in half. In order to receive this discounted fee, the prospective franchisee must use the Wendy’s Franchise Development Program.
In some limited cases, Quality may charge a Technical Assistance Fee of $25,000 or may wave this fee entirely.
There are other fees involved in purchasing a Wendy’s franchise. Any prospective or interested franchisees can download the full FDD to get more detailed information.
On specific occasion, Quality may cooperate with lenders to provide financing for qualified franchisees. The financing terms may also vary depending on factors like the purpose of the loan or the financial strength and abilities of the franchisee.
The franchisor advises that all prospective (and existing) franchisees consider these programs as financing alternatives. There is no obligation to provide information regarding potential lenders and financing specificities.
Quality may, in some situations, offer its own leasing programs to new or existing franchises that are in full compliance with necessary obligations. Often these programs require that the prospective franchisee provide various documents.
Training and Assistance
Before a prospective franchisee can open a Wendy’s restaurant, they are required to attend and complete (to Quality’s satisfaction) an initial training program. Any other business operators are also required to complete the training program.
The time and place of all training programs is designated by Quality. All costs of materials and instructors for the initial training program is also covered by Quality for both the prospective franchisee and their primary officer. Optional on-line training costs are the responsibility of the franchisee.
The length of the initial training program depends on the positions that the trainee will assume. Typically, the program lasts 20-24 weeks, which includes online, classroom, virtual instruction, and on-the-job training. The in-restaurant training is conducted at various certified Wendy’s locations across the country.
Location of the Wendy’s franchise
The Wendy’s Restaurant each franchisee operates is located at a Quality-approved location, which is identified in the Franchise Agreement. Without consent of the franchisor, the restaurant may not be relocated. If the prospective franchisee wishes to relocate the restaurant, the franchisor will consider the request based on the then-current policies. The approval of relocation depends on factors such as profitability.
Wendy’s franchisees have no exclusive rights or territory associated with the operation of the restaurant. Quality has the sole right to grant or refuse franchise rights to Wendy’s restaurants and may establish other Wendy’s restaurants that compete with your location.
Term of Agreement and Renewal
The length of the franchise term begins on the Effective date outlined on the Franchise Agreement and expires 20 years from the opening of the restaurant. Franchisees may renew their franchise agreement for 10 years, given that they are in good standing and comply with renewal conditions.
Restrictions on What the Franchisee May Sell
Wendy’s franchisees may use the restaurant solely for the operation of the business. The business must be open and in normal operation for the specified hours and days of the year. The location may not be used for any other purpose or activity without the written consent of the franchisor.
Each franchisee must offer to sell only the menu items, products, services, and related items that are approved for sale by Quality. Franchisees must avoid any deviation from the standards established by Quality.
Franchisee obligations for a Wendy’s franchise includes site selection, pre-opening purchases, site development, initial and ongoing training, opening obligations, compliance with standards, among other factors. It is crucial that franchisees understand and comply with these standards in order to fulfill the Franchise Agreement.
At the end of 2017, the Wendy’s franchise system had a total of 5,769 outlets.